Another major point to keep in mind is salary today vs growth in coming years. Getting a high salary today may bring with it unrealistic expectations. It may be your future bonus and raises that suffer. Your annual review will roll around and the managerial perception will be that you're already paid more than everyone on the team, so you're not getting a notable slice of the budget.

My point is that things aren't always black and while, and long term may be not as advantageous as they seem. If you're looking for a career, hoping jobs every year will not help. Becomes a red flag on the resume.

From the company's side: At most the amount of money you make the company, and at most the cost of hiring a replacement who could do the same job equally well.

From your side: At least the second-best job offer you've received.

Raising productivity is often a prerequisite for raising salaries - but you also need a tough hiring market, if you want the business to give the money to the workers instead of the bosses, investors or customers.

If you are friendly with any managers, it's good to find out the company's policy on competing offers. (I had a friend who was a manager in a different department, so I could find out company and HR policy on this kind of thing). Competing -offers is definitely something you only want to do if you are seriously about switching companies.

Different side story: My last job I was working out of a satellite office that was closed down as the company slimmed down to be bought out. We have around 50 people in the office. There was a 2nd and 3rd line manager that were cut when it all went down, so we were able to talk a bit more openly with them about it after the fact.

These managers were newer to the company and stunned at how low the salaries were for most of the individual contributors. They were doing the best they could to get salaries up-to-snuff, but when they were only given 3% (of the salaries of all their employees) to use to give raises, it was really hard to get people properly compensated.

Most lower-tier managers really do care for their employees, they just tend to be limited by corporate direction and what HR tells them they can and can't do.

When you are hired, you can negotiate a salary $X based on your skills, the company's needs, the job market, and a whole host of factors.

At each pay review period (or however your firm does it) thereafter you may get a salary increase of Y%. The realities of corporate politics, management, social dynamics, etc. say that the frequency of the review (or if you even get one) is mostly out of your control. Further, the amount of the increase may have little to do with you; maybe there's "no room in the budget for increases this quarter", or maybe your manager is giving you poor evaluations to try and keep you from being promoted out of his department thus reducing his headcount. Finally, there is a force in almost every organization that says that salary should be based on seniority not merit. There may be pay grades, or salary caps, and there is almost always some limit on the size of the raise any person can get without a top exec signing off on it. I could go on. :)

Meanwhile, you (hopefully!) have more knowledge and skills than when you were hired; you certainly have more experience. After a few years, you are almost certainly worth a lot more than when you were hired. (If the job market has improved since you were hired, this goes triple.)

The end result is that, for most people, your salary represents a pretty good snapshot of your "worth" when you are hired, but every quarter thereafter it diverges. Changing jobs periodically lets the good employees "lock in" that extra value. (Meanwhile the poor employees will do their utmost to stay, as they know they may not deserve all of the raises they've received. This is but one of many reasons why organizational performance trends downwards over time.)

You'd think that you could just renogotiate with your current employer. "Hey, I know I was only worth $60k when you hired me, but I'm now an expert on X, Y, and Z, and the job market is really hot right now. I know you've upped my salary to $90k, but you'd have to pay over $140k to replace me. Give me a raise or I'll go next door and get $120k." Seems logical, but human nature being what it is, this never works. Instead, you quit and go to work next door for $120k, while one of their guys quits his $90k job and comes to work at your old employer for $120k. Of course, both of you are now less productive for the next 6 months as you learn new systems and a new codebase. It's silly, but there you are.

As an employee, I've used a different approach (note: this is not intended to be reflected on the very strange environment of a startup, but on more established businesses)

When you start the job, ask for a salary that you'd be happy with, in fact give them $5-7 thousand dollar range with your ideal salary somewhere on that range (usually on the low end), and would stay happy with so long as it continued to rise at a reasonable percentage slightly higher than inflation. You also get information based on where they come in on your range.

The very first time you get a pay raise under that percentage or that doesn't keep up with inflation? Change jobs. If your pay raise isn't even keeping up with inflation, congratulations your reward for your last year's work is a de facto pay cut. That's what your employer thinks about you. Time to leave, period.

In one case I secured a better paying job in another part of the company, gave my intent to leave and was given a counter offer with a promotion and a double digit pay raise that beat where I was going. I told them that if I stayed, I would be committing to 12 more months, if my pay raise was again unacceptable I would leave. The next year the raise was below inflation, and I left for a much better job.

If the economy is good, give yourself a raise when changing jobs, treat it like a promotion, give yourself two years worth of pay raises for the new job when getting down to salary negotiations.

If you get promoted, expect at least two years worth of pay increase percentages. If you don't receive that, it's not a promotion, it's just more work for you. Never take-on additional responsibility without additional reward.

If they don't ask for your salary requirement, see what they offer, if it's low don't feel afraid to point that out and ask for a more realistic salary. In many cases I've worked in expensive cities, in small offices, that are part of very large companies in different states. Their salary expectations may be great where their HQ is, but might stink in the city. Point that out.

I've also worked in places where the yearly raise percentages reduce as your pay increases. So a starting employee on a starting salary might easily see double digit increases year over year, while an experienced employee might barely keep up with inflation. They struggled to keep experienced talent around.

If you're offered a choice between a small bonus and a pay raise, take the pay raise. That increased base pay makes a difference forever. Say the bonus is $5000 and the pay raise amounts to $2000 the next year. In three years it's worth $6000. In ten it's worth $20000 even if you never get another pay raise again. It's pretty much the best guaranteed investment you can ever make. Now, consider that it'll become part of your base pay history that you then make raises off of, which are percents of your salary, that raise is worth even more! Employers know this and try and convert pay increases into bonuses all the time, it's a one time payment that then gets off their books if they have a bad year the next year. Don't fall for it. There are exceptions, extraordinarily large bonuses shouldn't be turned down of course.

One you accept a salary (this includes your pay increase), commit to working there for at least 12 months. It can suck sometimes, but long term it looks better on your resume. I've typically put in 3-5 years at most places. I've never had to have one of those "why did you leave this prior employer after 3 months?" discussions, but I have had to have "why did you leave this place after working there so long?". In this market, working too short or too long can be unusual. The employee who's working someplace for 17 years and then suddenly wants to change jobs is a red flag. It wasn't boredom that made them change their job, any job is boring after a few years. Getting to 17 means they can beat that problem. Something else happened.

Following this plan, Over the last 18 or so years, starting out with a yearly pay of under $18k, I've managed to get consistent pay increases that are more than double inflation while working for bigCos, year over year pay increases of 15 to 20% have not been uncommon (if you aren't too stuck to a single company). I'm not "rich" by any means, but I live a very comfortable boring suburban life free from any debt beyond a rapidly disappearing mortgage on a very comfortable home with enough left over for lots of overseas travel every year. In about 5-6 years I'll have paid off my home, gone completely debt free, and then will literally have more money than I can spend in a normal day-to-day life. I still have to work, but I rarely have to think much about what things will cost when going out shopping. I went to normal boring state school for university, and have managed to consistently make (or grow my salary faster) than every single one of my peers who went to a "better school". Any advantage they had starting out has more than disappeared over the years.

Startups are a very different beast. And I know that alot of this won't be popular with the startup founders here ;)

#1 Don't accept a bad salary. You'll get all the lines about equity and stock options etc. In the end, unless you are one of the first employees and you happen to hit the lottery and end up at the next billion dollar company, your equity will be worth at or less than most normal bonus packages you'd receive anyway if it's worth anything at all. Take a normal salary. A company with good funding shouldn't squawk at paying their people decent salaries. But you might take a small hit on the salary. Keep a mental note of what this hit is if you go back to a BigCo. Correct for it, act like you were paid the higher amount, when negotiating your new salary with BigCo.

#2 You are very tied to the ups and downs of the company. Expect not to get a pay raise from time to time, especially in the early days until the company starts making a profit. If the goal of the company is not to make a profit and that you'll get your reward out of options, consider your payout divided by the number of years you'll have to put in and see if that makes you happy. Consider what would happen if the payout is $0.

#3 If the business booms, time to renegotiate your salary. Sometimes the company hits super profitability, point out that you took a smaller salary to get the company through the lean years and now it's no longer lean. If you went multiple years without a pay increase, expect the first increase to be unusually large (to make up for it) and future increases to be more normal.

#4 Don't accept ridiculous paycaps. They're stupid. A couple very well known startups cap their employee pay at $120k. One I know of hasn't paid raises for years. The employees who took a pittance first-out-of-college salary are still getting paid that 3,4 and 5 years later -- but now many are married and quite a few are having kids. Their company recently advertised that their valuation is nearing double digit billions (but now in their 5th or 6th funding round with no public plans to sell or go public so equity these days is almost worthless). Does that sound right?

Remember, what's your payout going to be divided by years. Suppose bigCo buys this startup tomorrow, many of those employees might see a sweet $150k payout. Or $30k per year for 5 years of work. Suppose their starting salary was $50k that means they've been working for $80k the entire time. Instead of 5 lean years they could have had 5 satisfied pay years elsewhere.

Even worse, when moving on to another company, especially a bigCo, their suppressed salary puts them way down at the bottom of the pay scale. It's "diseased" their future salary prospects. Just like taking a small raise instead of a bonus "boosts" your future salary prospects, they've managed the inverse...and because the caps and pay policy of this startup are very publicly known, they can't negotiate or talk their way it.

#5 All is not lost, perks are awesome, figure out how much it would cost you out of pocket for the perks you use and then figure that into your total compensation. Some places are receptive to "my total compensation at my last place was $xyz, but I'm looking for a different kind of mix of $qrzw". These are more complicated, but you can say "my last employer gave me about $5k a year in perks that I used. I'd rather have that as salary here". It's reasonable, even if not every place is receptive to it.

If they ever get an offer from a huge company, you would get stuck trying to match what such companies can afford, even if they didn't actually intend on leaving, and just wanted a raise. Then when the rest of the staff know how much they could be making, you'll end up with a lot more problems - either you'll have to raise them all, or put up with disgruntled employees who want to leave because you "aren't being fair" to them.

It also doesn't force you to keep someone who is under-performing and raise them to the rate offered by another company that isn't necessarily aware of why you do not believe they are worth that amount.

Also don't forget that they can tell their new offer that they got a counter offer, and there is a good chance they'll raise them even higher since they've already deemed the candidate valuable enough to hire, and started that ball rolling already. Essentially it's a two-step bidding war that is stacked against you.

This is basically why it's best to not say anything out loud. There will be times that you will not feel so generous toward an outbound employee.

Just to have concrete numbers to work with, suppose initial offers exactly correspond to final pay and that you're currently making toward the lower end of that range (e.g. because raises haven't kept up with your increased skill and increased market demand).

If you're currently making $X/yr (total comp), you think you _might_ be worth $X+$50k to somebody, and you spit out $X+$50k as your target range, a prospective employer could generously offer $X+$60k and you'd be happy as a clam and none the wiser while missing out on a new Tesla per year in extra pay.

There's a separate argument that if you'd be happy with $X+$60k then you shouldn't try to squeeze your employer for more, but I'll let somebody else make it if they'd like. Regardless, that big of a spread really does exist, and I imagine it grows further into one's career.

But in some companies, after they decide to make an offer, it will be "how much to get you to accept". So that wouldn't be a function of their options so much as a function of your options.

As to how the calculus changes when it comes to retention, in your company, I don't know.

(Tech companies overall are famous for being good at luring talent (e.g., huge pay bump from current place) but bad at retention (e.g., small raises that don't track with market and value to the company). Hence the common practice of job-hopping frequently, and all the long effects that might have on software engineering practice (e.g., resume-driven development, and people not around long enough to see how engineering decisions play out).)

Do you trust your manager to deal with you in good faith, to have your best interests in mind, and to represent you competently with the company machine? Maybe see whether your manager thinks the company is paying what the processes (not necessarily individuals) implicitly think is what they can get you to accept, rather than what it would cost to hire and retain someone who could provide as much value to the company. If it's the former, see whether that sounds exploitative to you and your manager. If it does, maybe manager can look into whether something leadership wants to reflect upon, and see whether it can do anything to improve that.

I thought to myself...that's not how it works. I'm sure I could have negotiated higher. But I wonder if he thinks I inflated my salary and those said match.

Keeping in mind my current company has some of the best benefits I've seen outside of Silcone Valley...

I am paid above market median already in my current job. I could probably reasonably add 15 - 25 percent if I jumped once, maybe 60 percent if I jumped 3 times over 3 - 5 years.

I would have to change my role though and switch from an expert role into leadership/management with responsibility for people (wouldn't be a problem) and way less time to do the stuff I like about my job.

Btw. looking back over a somewhat longer time frame my current compensation is higher by a factor of 4.5 then around 11 or 12 years ago.

It isn't as if I would not look out for myself. Or would want to be compensated significantly below market rates. Just that for myself and the team I am part of I try to optimize for agreeableness and long-term thinking.

The one counterintuitive piece of advice is don’t overpay (I made this mistake in version 1 of my company). Pay above the average the employee could earn elsewhere, but not too much over.

You want to pay enough that no one leaves to get a pay rise, but not so much that they can’t get a similar salary elsewhere. A smart unhappy employee that feels they can’t leave can cause a lot of damage in ways that are hard to identify and fix.

Edit. I think I was unclear about what I meant by average pay - it is not the average for the job title, but the average the employee could earn in the industry. These two numbers are close most of the time, but with high performers they will be significantly different.

In all the technical teams (sysadmins, dbas etc) that I've managed, I've consistently seen variations of between $50k-100k between the lowest and highest paid person of the same skill (ie I'm not comparing junior to senior staff).

The things I learned as a manager:

* Always know what the market is paying for your skills. Even if you are not looking for another job, remain subscribed to job websites so you understand what the market is after and what it is paying

* Sharing salary information with people you trust is incredibly valuable - you need to know where you stand. It's in the companies best interests to keep everyone in the dark - it means you won't know your true worth.

* If you love your job, by all means stay - but make sure you aren't using that as an excuse to cover up the fact that you are scared to make a jump, or that your ego is wrapped up in your job title. There are no medals for long service - and as companies (in my experience) generally only pay market rates to external hires, you are better jumping jobs every few years than staying in the one place. You'll develop more skills, earn more money, and I believe in the long term more employable.

My question stems from the fact that I make about median market rate for my experience and location. I'm having trouble making a plan for how my salary should increase as my experience and career evolve. If I'm currently making median market rate, I'm unsure if it's reasonable to expect a jump into the 75th percentile for my next position during the negotiation process.

First, most recruiters/hiring managers ask for current comp (or at least a salary range) early in the discussion, so it should be easy for them to offer well over someone's current pay. This simply removes one bargaining tools (lying about current comp) for an employee considering a move elsewhere.

Second, matching outside offers very quickly becomes a slippery slope. Anyone who figures out that such a policy exists will quickly come to the realization that the easiest way to get a raise is to put themselves onto the market. That's toxic, not to mention unsustainable.

Finally, equity. The one-year cliff exists for a reason, and if you're playing for keeps with an early-stage startup, you're probably expecting (or at least hoping) for your ownership stake to be worth a lot more in the long run than your salary.

Forget your title. Are you happy with your salary and job? If no, move on. It's not like your next company can verify your current level or they even really care (outside of salary requirements). I ended up leaving the job because my great manager left and my new manager was horrible. It had nothing to do with level, and everything to do with job satisfaction.

Salary increases tend to be considered in relation to your current salary, not in relation to your value to the company, unless you do something mind-blowing. Better to get in at $120k and never get a raise than to get in at $80k and get small raises every 6 months.